Android App Developers Endure Lower Sales in Search of Growth

The accelerating rate of Android phone sales is luring some developers that keep long-term prospects in mind. Photographer: Kim White/Bloomberg

Sept. 2 (Bloomberg) -- Pinger Inc., a developer of mobile
applications, can get twice as much in sales from programs for
Apple devices than for phones powered by Android software.
That’s not stopping it from creating its first Android app.

“Even if the revenue generation might be less, we think
it’s still going to be significant,” said Joe Sipher, chief
product and marketing officer at San Jose, California-based
Pinger, which makes text-messaging and other programs. “Our
users are saying, ‘Gosh, I switched to an Android phone, can you
put your Textfree app on Android?’”

Pinger and other programmers don’t want to miss out on the
$40 billion that Booz & Co. estimates will come from sales of
apps by 2014, much of it from Google Inc.’s Android platform.
Android unseated Research In Motion Ltd.’s software as the top
mobile operating system in the U.S. last quarter. That’s making
developers more willing to put up with its drawbacks, including
higher app-creation costs and an online marketplace some users
consider harder to navigate than Apple’s App Store.

PopCap Games Inc., maker of the “Bejeweled” and “Plants
vs. Zombies” games, doesn’t yet have any titles in the Android
Market. By mid-2011, the Seattle-based company expects to
release games simultaneously for iPhone and Android handsets.

‘High Hopes’

“Even though we are not making any money on Android right
now, we have pretty high hopes for it,” said Andrew Stein,
PopCap’s director of mobile business development. “There’s
really no reason why users shouldn’t consume and buy content to
the same extent on an Android phone as they are on an iPhone.”

Android phones like Motorola Inc.’s Droid X and HTC Corp.’s
Droid Incredible are gaining devotees. Stein said he expects
revenue generated from Android games to approach that of its
iPhone versions by the end of 2011.

A wide variety of apps -- as well as the availability of
the most popular ones for games, location, texting and content
-- is critical to luring phone buyers. Apple has more than
250,000 apps available, compared with about 70,000 for Android.

Like Apple, Google takes a 30 percent cut of revenue from
apps sold in its marketplace.

“We want to reduce friction and remove the barriers that
make it difficult for developers to make great apps available to
users -- across as many devices, geographies and carriers as
possible,” said Randall Sarafa, a Google spokesman.

Google rose $10.32, or 2.3 percent, to $460.34 yesterday on
the Nasdaq Stock Market. The stock has lost 26 percent this
year.

Android Remedies

Google may be taking steps to remedy some of the issues
that make Android app creation less lucrative to developers.

Apple iTunes users can do one-click shopping because iTunes
saves their information. While Android buyers can do the same if
they sign up for Google Checkout, that service doesn’t have as
many users. Android Market also lacks features for in-app
purchases, which some developers of Apple apps use to sell new
game levels or virtual products, said Tim Chang, a venture
capitalist at Norwest Venture Partners, whose investments
includes iPhone-game maker Ngmoco.

Google is in talks with EBay Inc.’s PayPal to add its
payment service, three people familiar with the matter said last
month. That may ease the process for buyers. Google may also
offer tools that let developers sell subscriptions and virtual
goods from within apps, Andy Rubin, Google’s vice president of
engineering, said in June.

For now, producing programs for Android isn’t as lucrative.
Loopt Inc., the maker of an app for locating your friends on a
map, and Zecter Inc., which offers the ZumoDrive file storage
service, said they derive less in sales from Android apps than
iPhone versions. Neither of the Mountain View, California-based
companies would specify the difference.

Paid Versus Free

“There’s no question Android has a lot more phones out
than six months ago, but that’s very different from saying
Android is a more appealing platform for developers,” said Sam
Altman, chief executive officer at Loopt.

ZumoDrive makes money by getting people to download the
free program and then upgrade to a paid version. Thirty percent
more iPhone customers do that, said CEO David Zhao.

Besides attracting fewer paid app downloads, fewer people
click on ads in Android programs, according to data from Smaato
Inc., a Redwood City, California-based mobile-ad firm. In July,
the iPhone had a “click-through” rate of 140 in the U.S.,
compared with 103 for Android, Smaato said, citing data that
measures which operating system had users that clicked on
advertisements more often.

Plus, the market share Gartner Inc. measures for Android --
34 percent in the U.S. last quarter -- doesn’t mean there are
that many customers for apps, said Pinger’s Sipher. Some Android
phones don’t have the ability to access Google’s app store and
the proliferation of different models means some programs won’t
work on some phones.

Product Variables

App creators have to contend with various versions of
Android and differences in screen resolution and keyboard. That
makes it more expensive to test programs and can force
developers to design for the lowest common denominator, said
Bill Predmore, president of POP, which builds mobile
applications and ads for clients including Google, Microsoft
Corp. and Target Corp.

Still, the accelerating rate of Android phone sales is
luring some developers that keep long-term prospects in mind.
While Zumobi, which makes MSNBC’s mobile app, gets less than 3
percent of its traffic from Android, the developer is investing
almost as much in Android apps as it does for the iPhone, said
co-founder John SanGiovanni. Zumobi’s free, ad-funded programs
get about the same revenue, and in some cases, even a bit more,
from Android, he said.

‘Senseless’

Google, itself, could help narrow the revenue gap for
developers, according to Trip Hawkins, the founder of Electronic
Arts Inc. who now runs mobile-gaming company Digital Chocolate.
He calls Google’s policy of letting consumers use paid apps for
as long as 24 hours and return them for a full refund
“senseless and lazy.”

“As a game platform right now, Android strikes out,”
Hawkins said. “As long as they keep selling devices, Android
could be a good game business by 2012, but it would blossom now
if Google would get out of their own way.”